How the VAT return works

A VAT return summarises the VAT you have charged on sales and the VAT you can reclaim on purchases. You pay HMRC the difference, or receive a refund where reclaimable VAT is greater. Most businesses file quarterly, though monthly returns are available.

The nine boxes

For most UK businesses, only Boxes 1, 4 and 5 matter. Boxes 2, 8 and 9 apply only to EU or Northern Ireland goods movements and are usually zero.

• Box 1: VAT charged on sales (output VAT)
• Box 3: Total VAT due (Box 1 plus Box 2)
• Box 4: VAT reclaimable on purchases (input VAT)
• Box 5: Net VAT to pay or reclaim (Box 3 minus Box 4)
• Boxes 6 and 7: Total sales and total purchases, excluding VAT
• Boxes 2, 8 and 9: EU/NI goods movements, usually zero for UK businesses

Your role in the process

Keep Xero up to date and fully reconciled before each quarter end. Where VAT returns are included in your plan, we review the figures, check for errors, present the return for your approval, and submit it to HMRC via Making Tax Digital. Nothing is filed without your approval. If it is not included in your plan, you remain responsible for your own returns, and we can add this service on request.

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